Third section of the Medium Term is titled 'macroeconomic policies and objectives. Second paragraph of this section makes the following short evaluation regarding the world economy: "The recovery of our country from the influence of the global crisis is closely related with the improvements in the world economy. Targets in the program are determined by taking also forecasts about foreign economic conjuncture. Recent estimations of international institutions suggest that throughout the world the recovery will start from the beginning of the last quarter of 2009 and in 2010 a positive growth will be realized even at a low level...

The program does not make any evaluations for the period after 2010 and the following paragraph says "According to the frame of predictions regarding the world and measures to be taken, in the Program- me period gradual improvement has been aimed in economic growth and public balances." Apart from these, the program makes one-sentence references to conditions in the rest of the world in 'balance of payments', 'growth' and 'price' sections which are not any different than the quoted evaluations above.

Let me remind you the economic growth forecasts of the program: A growth path from 3.5 percent in 2010 to 4 percent in 2011 and 5 percent in 2012 is estimated. For the last two commentaries, I have been making evaluations about the path determined for fundamental variables, especially for growth. Main questions I asked are: Are the forecasts realistic? Under which conditions the program can be successful? The picture that appears was:

There was a need for a mechanism that assures that the promises given in the program, especially those about public budget will be met. Given that the general elections will be held soon, this need for assurance became clearer. Medium Term Program says that such a mechanism is being worked on: "It is targeted that the legal infrastructure related to the fiscal rules will be completed before the first quarter of 2010. Starting from 2011 budget year, public fiscal management will be carried out in accordance with the determined fiscal rules." In short, a promise about the future is made, that is all.

I said that in addition, a structural reform program to spread the tax collections down to the base and to improve the skills level of the labor force is necessary. Program enumerates a number of reform titles all of which are set forth with verbs like 'to be implemented', 'to be ensured', or 'to be executed'. And that is all. What is more, we do not know the answers for the questions 'which of these can we accomplish in three years?' and 'what are the priorities?'

Therefore, there is a risk that the program, main macroeconomic objectives (or in some cases estimations) of which seem 'attainable', fails as a result of some situations stemming from our actions. This risk will be reduced or elevated depending on to the extent that the two lacking points I mentioned above will be eliminated.

But there also is the risk that the program fails due to reasons not originated from our actions. To what extent are the forecasts about the rest of the world that the program touches upon briefly realistic? There is no doubt that the question of this important question is uncertain. The main assumption of the program in this regard is that recovery in important economies of the world will start as of the end of 2009. It is also foreseen that recovery will not be rapid. This is the first scenario that appears in our minds about global growth in the light of information at hand.

But please note that in the middle of 2008, no contraction in world economies was expected. Only a moderate slow down was foreseen. Collapse of credit market with the bankruptcy of Lehman in September 2008 and the following rise in perceived risks to unprecedented levels nearly halted domestic demand in many countries. World trade was damaged seriously. Therefore, estimations at the beginning of 2009 were highly pessimist despite early estimates. In brief, in 6-9 months, two highly different growth estimates were made. Please also note it was also expected that recovery in large economies will not be 'V' shaped but 'L' or 'U' shaped.

Therefore, it will be wise to reconsider an alternative world growth scenario and assess fundamental forecasts and objectives of the Medium Term Program also with that lens. This alternative scenario is most probably already made; but we do not know the results as it is not yet announced. But, if the growth in world economies turns out to have a wide-based 'U' shape let alone the 'L' shape, Turkey's achieving the growth forecasts for 2010-2012 period, which are already non-ambitious, will become risky. To put it clearly, even those non-ambitious estimates fizzles out. In that case, what is our Plan B; or Medium Term Program -B?

This commentary was published in Radikal daily on 28.09.2009